QUIZ 3 VERSION 1 1) The law of demand describes A) an inverse relationship between the price of a good and the demand for the good. B) a direct relationship between the price of a good and the demand for the good. C) a direct relationship between the price of a good and the quantity of the good demanded per unit of time. D) an inverse relationship between the price of a good and the quantity of the good demanded per unit of time. 2) When the price of butter falls, the demand curve for margarine is likely to A) remain stationary, although its price will fall. B) shift to the right. C) remain stationary, although its price will rise. D) shift to the left. 3) In deriving the market demand curve for a commodity the only variable that can change is the A) income of consumers. B) distribution of income of the consumers is held constant. C) price of the commodity. D) tastes of the consumers . 4) Suppose that a more efficient way to produce a good is discovered thus lowering production costs for the good. This will cause A) a decrease in supply (a leftward shift of the supply curve). B) a movement up the supply curve. C) an increase in supply (a rightward shift of the supply curve). D) a movement down the supply curve. 5) A rise in the quantity demanded of lemons can be attributed to a A) decrease in the price of artificial lemon flavouring. B) leftward shift in the supply curve of lemons. C) rightward shift in the supply curve of lemons. D) decline in the number of people drinking lemonade. 6) In Figure 1, if supply were to increase, this would lead to A) no change in P or Q . B) a decrease in both P and Q . C) an increase in P and a decrease in Q . D) a decrease in P and an increase in Q . FIGURE 1

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Steak and hamburgers are substitute goods, hamburgers and ketchup are complementary goods, however, ketchup and steak are independent goods. If the price of steak rises we expect that the A) demand of ketchup will decrease. B) price of ketchup will increase, and the quantity sold will increase. C) supply of ketchup will increase. D) price of ketchup will increase, and the quantity sold will decrease. 8) If a demand and a supply curve can be stated functionally as Q d = 100 - 5 P ; and Q s = 90 + 5 P respectively, then the equilibrium quantity and price ( Q , P ) would be A) 190, 1. B) 190, 10. C) 1, 95. D) 95, 1. 9) A shift in the supply curve for good X in Figure 2 from S 2 to S 1 might be caused by A) an improvement in the technology of producing good X. B) additional suppliers entering the industry. C) a rise in the costs of producing good X. D) a decrease in the price of X. The supply and demand schedules for the umbrella market are given below: Price Quantity Supplied Quantity Demanded $10 400 700 $15 500 650 $20 600 600 $25 700 550 $30 800 500 TABLE 1 10) In table 1, the equilibrium price for umbrellas is ________. A) $10

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